When choosing an ERP solution, you’re faced with two main options: on-site (or on-premise) software, or cloud-based software. Before making a choice, it’s important to understand the differences between the two types of systems, and see the strengths and weaknesses of each so you can make an informed decision.
The big difference is how each system is “delivered.” With on-site ERP systems, all of the software – and requisite hardware – is installed locally and managed by your IT staff. This means software, any hardware, and servers for data storage, are all under your ownership and management. On the other hand, cloud-based ERP systems are a “software as a service” (SaaS), meaning they are centrally managed by the ERP company, and delivered to your system via the internet.
Here are a few major points to consider when choosing between on-site and cloud-based ERP systems:
1. Cost
Installing an ERP system of any kind comes with a price tag. With cloud-based solutions, these costs are spread out in the form of subscription fees, generally paid monthly or annually. On-site solutions, however, will require a much higher initial investment. Depending on your business and existing equipment, on-site ERP can require installing servers and hardware, and even software customization. With this option, you will also be responsible for the costs of updating equipment, maintenance, and staff to do the work.
Over time, the cost differences tend to level off. On-site ERP systems, once established, have ongoing costs related to staff and maintenance, but the brunt of the financial burden happens during installation. Cloud-based ERP is largely the opposite. Up-front costs are relatively small, but they remain ongoing month-after-month for the duration the software is in use.
2. Updates and Maintenance
Maybe the largest difference between the two options, maintaining and updating your ERP system is an unavoidable necessity. Maintenance is simply a requirement of any system. As your company changes and grows, as software and hardware continue to improve, and as your ERP needs evolve, updates have to happen as well.
With cloud-based solutions, all of this maintenance happens on the service provider’s side. Their IT staff is responsible for upkeep on servers, databases, and back ups. Also, because they are in the business of providing such services, it’s in their best interest to use the best, most up-to-date equipment. The same is true for software. The cloud-based ERP provider develops updates, rolls them out to customers, and remains responsible for operating a support staff for any changes or problems their users may encounter.
On-site systems, however, must be maintained and updated in-house. That means any new equipment or software must be installed by your team. Any maintenance required will also fall to your staff – and your dime.
3. Customization
Every company will have different needs for their ERP system. For some, the options available across different cloud-based providers may be enough, especially with some of the add-ons and tiered pricing available for increased services. However, for a truly customizable system, tailored exactly to your business, an on-site solution is the only option.
Now, not everyone will need total control over their ERP system. The options available in many SaaS ERP systems are plenty robust. They may not, however, cover every unique need – especially for extremely niche industries.
This is the one category where on-site systems take the cake. If you need something customizable, the startup costs and commitment to your own maintenance/updates may be well worth the trouble.
Each business looking to incorporate an ERP system will have to make a choice based on their unique needs. Barring full customization, though, it seems that cloud-based ERP is the clear winner here. Having a dedicated staff for support and maintenance – all covered by your subscription – saves you money. Keeping it off-site lets you focus on operating your business.
Having your data on a cloud-based server may be a concern for some, but most providers will have as strong a security protocol as any you’d use in your own systems. Cloud-based providers will likely offer additional assurance that your data won’t be lost in a natural disaster or other catastrophe. With the benefits of support staff, ongoing updates, and the efficiency of web-based systems, cloud-based ERP is likely the smartest solution for most companies.
Belmero can help you explore the options and find the best for your business! Contact us today to find out more.
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